Wednesday, July 6, 2011

As CBC reported yesterday, Siemens Canada is planning to bid on Ottawa's LRT project. But the international giant isn't too keen on Ontario's new Canadian content policy. Under the rule, which was enacted September 2008, public transit vehicles purchased with even a dollar of provincial money must be at least one-quarter Canadian made. The province has pledged $600-million towards Ottawa's project, so contractors who bid when the RFP goes out this fall must demonstrate they can fulfill this requirement.

Siemens doesn't like the policy because its North American manufacturing plant is in Sacramento, California. The company has quietly approached both the City of Ottawa and the province to discuss altering the Cancon regulation, or waiving it altogether (though according to provincial officials there's been no formal request). The company's Canadian spokesperson, D.L. Leslie, says the 25 per cent rule gives Canadian train-builder Bombardier an unfair advantage.

"That's one of the reasons we're talking about an ammendment or waiving, it's that it would make a plain and even playing field for all competition...[Bombardier] is the only manufacturer or the only supplier that has a facility here in Ontario." Leslie says Siemens could include Canadian content in all kinds of other ways if it's awarded the project, but the company can't be expected to construct a train manufacturing plant here.

Neither the City nor the province appear to be taking the complaint too seriously. A City Hall source says staff within the light rail office have pre-assessed several companies expected to submit bids, and have determined they're all capable of competing for the prize. That includes Siemens.

The official line from the Ministry of Transportation is pretty clear: "There are no plans to change the policy."

And Infrastructure Minister Bob Chiarelli says "this [policy] is the most appropriate way to support jobs and maintain an open bidding process...I've heard of various strategies by train manufacturers to become compliant. It's a little more trouble but I don't think it's overly taxing [Siemens'] competitive position. It's a very reasonable policy."

Chiarelli points out local content policies exist in many other jurisdictions, including our NAFTA partners the United States and Mexico. Such rules also exist in Europe, Japan and China. In some cases contracters bidding on infrastructure projects must conform to a 60 per cent domestic manufacturing policy.

Anyway, Siemens does indeed appear to have a Plan B. "We are interested in this project, and right now the project has a 25 per cent [requirement] so I'd imagine we would continue with our view of wanting to be participating in the project," says D.L. Leslie.

Siemens was of course the company chosen to build the last light rail plan when Bob Chiarelli was mayor of Ottawa. The new council, and the new mayor, cancelled the project, and Siemens sued, settling for nearly $37-million. Nevertheless, Leslie says the City of Ottawa has been a "good customer" in other areas, and the company is eager to continue doing business here.